LONDON MARKET CLOSE: US-China Progress Drives FTSE To One-Month High

(Alliance News) - Hopes that the US and China will soon finalise their "phase one" trade deal saw stocks in Europe surge on Monday, with the FTSE 100 reaching its best levels in over a month as miners and oil majors gained.

The FTSE 100 index ended up 67.27 points, or 0.9%, at 7,369.69, the index's best closing price in over a month. The FTSE 250 ended up 90.95 points, or 0.5%, at 20,249.72, and the AIM All-Share closed down 1.38 points, or 0.2%, at 889.32.

The Cboe UK 100 ended up 0.1% at 12485.06, the Cboe UK 250 closed up 0.3% at 18144.10, and the Cboe Small Companies ended down 0.1% at 11244.48.

In European equities on Monday, the CAC 40 in Paris ended up 1.1%, while the DAX 30 in Frankfurt surged 1.4%.

"Building on the momentum seen at the open, the hopes that 'phase one' of the US-China trade deal will be signed soon(ish) pushed the markets to a bevy of month/year/decade/all-time highs on Monday," said Connor Campbell at Spreadex.

"US commerce secretary Wilbur Ross, though not part of the actual negotiating team, lit a fire under the markets with his optimistic comments regarding the likelihood of Presidents Trump and Xi putting pen to paper in the coming weeks. He also said that licenses for US firms to restart selling components to Huawei would also be arriving sharpish," he added.

Senior Chinese and US officials again sent positive signals on Friday about their efforts to formalise the partial trade bargain announced last month, with President Donald Trump saying he may meet with Chinese counterpart Xi Jinping in the US state of Iowa.

Chinese Vice Premier Liu He on Friday spoke by telephone with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, a call both sides described as "constructive".

Stocks in New York were posting solid gains at the London equities close, with the Dow Jones up 0.6%, the S&P 500 index up 0.5%, and the Nasdaq Composite also 0.5% higher.

Gold dipped amid the risk-on mood, the safe haven asset quoted at USD1,505.64 an ounce at the London equities close Monday against USD1,511.25 at the close on Friday.

However, Brent oil benefited on demand hopes stemming from improved US-Chinese relations, quoted at USD62.70 a barrel at the London equities close Monday from USD60.66 late Friday.

This caused Royal Dutch Shell 'A' and 'B' shares to both close 2.0% and 2.1% higher, respectively, and BP to gain 2.7%.

London-listed miners also advanced on the US-China news, with Glencore closing up 5.1%, Rio Tinto up 3.4% and BHP Group up 2.9%.

Other stocks with a substantial exposure to the world's second largest economy saw share price gains, such as Prudential, up 1.8%, and Burberry, up 1.2%.

Elsewhere on the London Stock Exchange, gambling firms fell after a UK cross-party parliamentary group sought to limit online betting stakes.

Flutter Entertainments - formerly known as Paddy Power Betfair - ended the session 3.2% lower, while 888 Holdings slumped 13% in the FTSE 250, with William Hill and Ladbrokes owner GVC Holdings not far behind, finishing down 13% and 6.4% respectively.

The UK Gambling Related Harm All-Party Parliamentary Group, in its interim report into the online gambling sector, recommended the introduction of gambling legislation with a focus on harm prevention, and online stake and prize limits.

"The report finds no justification for online slot machine style games with staking levels above GBP2, as it is offline," the GRH APPG said.

David Madden at CMC Markets commented: "Out of the group, Flutter have held up the best as their update in August showed that sports betting accounts for approximately 80% of their revenue, while the casino unit equates to roughly 20% of income. GVC, William Hill and 888 are far more exposed to casino style gaming, hence why the shares have suffered so much. When it comes to regulation in the UK, the tide seems to be turning towards tougher rules so the London listed firms will probably continue to move into fresh markets like the US."

International Consolidated Airlines closed up 1.1% after buying Spanish airline Air Europa for EUR1 billion in cash from Globalia.

Air Europa operates domestic and international flights to 69 destinations, including long-haul routes to Latin America, the US and North Africa.

The FTSE 100-listed airline's rationale behind the deal included making IAG's Madrid hub into a "true rival" to Europe's four largest hubs - being Amsterdam, Frankfurt, London Heathrow and Paris Charles De Gaulle.

In other airline news, Ryanair shares rallied 8.2% after the budget flier reported a resilient first half.

For the six months to September 30, Ryanair's revenue was up 11% year-on-year to EUR5.39 billion. Traffic was up 11% to 86 million passengers with an unchanged load factor of 96%.

Air fares were 5% lower, Ryanair noted, due to lower demand in the UK as well as overcapacity in Germany and Austria. Ancillary revenue, however, was up 28% to EUR1.65 billion.

Group pretax profit was flat at EUR1.26 billion. Fuel & oil costs rose 22% to EUR1.59 billion, and overall costs climbed by 16% to EUR1.29 billion.

In economic data on Monday, the UK construction sector's decline eased somewhat in October, though conditions remain challenging.

At 44.2 in October, the latest IHS Markit/Chartered Institute of Procurement & Supply purchasing managers' index was below the no-change mark of 50 but improved slightly from the 43.4 points registered in September.

Things were little better for the eurozone's manufacturing sector, which saw its October PMI edge up to 45.9 from September's 45.7. The October figure is the second-worst in seven years.

There was a "sharp" fall in new orders, IHS Markit said, though slightly better than September. Manufacturing output in the eurozone showed "sustained" weakness, and job losses were at their worst since early 2013.

The pound was quoted at USD1.2908 at the London equities close Monday, compared to USD1.2941 at the close on Friday.

The euro, meanwhile, stood at USD1.1142 at the European equities close Monday, against USD1.1165 at the same time on Friday.

Against the yen, the dollar was trading at JPY108.60, up compared to JPY108.24 late Friday.

In the economic calendar on Tuesday, there is British Retail Consortium like-for-like sales at 0001 GMT and Ireland's services PMI at 0101 GMT. This is followed by a services PMI from China at 0145 GMT and, later on, the same from the UK at 0930 GMT and the US at 1445 GMT.

There is also eurozone producer prices at 1000 GMT and the US trade balance at 1330 GMT.

In the UK corporate calendar on Tuesday, Associated British Food's annual results are due, as are tobacco major Imperial Brand's. There are interim results from train and coach ticketing platform Trainline and third quarter results from office workspace provider IWG.

By Lucy Heming; lucyheming@alliancenews.com

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